Financial Crime World

Title: Singapore: A Financial Hub with Potent Financial Crime Risks

Singapore, the world’s only sovereign city-island nation, is renowned for its extensive external trade and a robust financial services sector. With a high score of 0.939 on the UN Human Development Index and an AAA sovereign rating, Singapore has become an international financial and high-tech hub. However, its strategic location and dynamic economic landscape expose it to diverse financial crime risks.

Compliance with FATF Recommendations

According to the Financial Action Task Force (FATF) Mutual Evaluation Report published in 2019, Singapore is:

  • Largely Compliant with 17 FATF Recommendations, and
  • Partially Compliant with 3 Recommendations.

Singapore: Geographic, Economic, and Contextual Factors

Attractive Target for Financial Crimes

Singapore’s geographic position and robust economy make it an attractive target for financial crimes, despite its high social indicators and regulatory framework.

Bribery and Corruption

  • Singapore ranks as the 5th least corrupt country in the world, according to the Corruption Perceptions Index 2022 by Transparency International.
  • This accomplishment can be attributed to Singapore’s numerous rigorous audit controls and anti-corruption measures.

Money Laundering

  • Singapore’s position as a significant international financial, investment, and transit hub makes it a potential risk for money laundering.
  • The country has the highest level of financial secrecy in Asia and is ranked as 100/128 in the Basel AML Index 2022.
  • Singapore is at risk from trading partners such as Panama and Hong Kong, as per the Financial Secrecy Index 2023 by the Tax Justice Network.

Drug and Weapons Trafficking

  • As a significant distributor of controlled substances and firearms, Singapore is vulnerable to the illicit production and distribution of drugs and weapons.
  • The country’s anti-trafficking laws are generally adequate, and conviction rates are high.

Environmental Crime

  • Singapore acts as a major transit hub for various endangered species and their derivatives, making it a target for wildlife trafficking.
  • The country’s strong legal framework and enforcement capabilities contribute to its low environmental crime risk.

Modern Slavery and Human Trafficking

  • The Trafficking in Persons Report 2023 by the U.S. Department of State notes that while Singapore has made significant progress in addressing human trafficking, low-risk foreign workers are still at risk, particularly in sectors like construction, manufacturing, and domestic services.

Cybercrime and Fraud

  • The sharp rise in cybercrimes and fraud cases in Singapore is a growing concern for the city-state’s financial industry.
  • An increase in scam reports prompted authorities to launch dedicated teams to combat online fraud.

Terrorist Financing

  • Singapore is a significant risk for terrorist financing due to its geographic proximity to terrorist activity and its role as a financial hub in the region.
  • While the Monetary Authority of Singapore has taken measures to mitigate this risk, it remains a concern.

Overall Financial Crime Risk

Singapore’s strong regulatory framework and commitment to international standards have improved the country’s financial crime risk profile. Still, its strategic position as a global financial hub necessitates ongoing efforts to enhance its regulatory framework.

Endnotes

[1] A. C. Birch, S. S. Woo, M. J. Lee, & J. Kim (Eds.). (2023). F2023 Financial Crime: Singapore Financial Risk Factsheet. Singapore: Author. [2] Financial Action Task Force, (2019). Mutual Evaluation Report of Singapore: 2016 and follow up report 2019. FATF. [3] A. C. Birch, S. S. Woo, M. J. Lee, & J. Kim (Eds.). (2023). F2023 Financial Crime: Singapore Financial Risk Factsheet. Singapore: Author. [4] Transparency International, (2022). Corruption Perceptions Index 2022. Berlin: Transparency International. [5] Basel Institute on Governance, (2022). Basel AML Index 2022. Basel: Basel Institute on Governance. [6] Tax Justice Network, (2023). Financial Secrecy Index 2023. London: Tax Justice Network. [7] A. C. Birch, S. S. Woo, M. J. Lee, & J. Kim (Eds.). (2023). F2023 Financial Crime: Singapore Financial Risk Factsheet. Singapore: Author. [8] Singapore Police Force, (2022). Annual Crime Statistics. Singapore: Singapore Police Force. [9] Monetary Authority of Singapore, (2021). Report on Money Laundering and Terrorist Financing Risks in the Singapore Financial Sector 2021. Singapore: Monetary Authority of Singapore.